Refinancing Challenges And Litigations Put Focus On CMBS Valuation

The "Location, Location, Location" mantra intended to mean the three things that matter most in real estate should be replaced by "Valuation, Valuation, Valuation."

Valuation is the foundation of a successful CMBS deal and key to setting expectations, from cash flow to recovery. It should take paramount importance in times of economic flux because when, as now, there is uncertainty and the potential for losses, it is the area where deal parties may be most vulnerable to legal claims by investors, including ones related to special servicing practices, net operating income (NOI) and property appraisals.

In fact, valuation issues have already become the center of litigation and are impacting the ability to refinance in a rising interest rate environment.